Top 10 Points for Angel Investors
by Bob Chaworth-Musters
Private equity investors expect entrepreneurs needing equity financing will provide the following information. Explaining your business is obvious, but investors also want to you to explain how they will profit and when. It is essential that you cover all 10 points briefly or in detail depending on time available.
- The Need: Explain very simply and clearly what the market need is.
- The Business: one very clear and succinct sentence or phrase that meets this market need profitably. Is it a painkiller "must-have" solution or a vitamin "nice to have " solution? Summarize the substantial cap-ex and op-ex savings and payback period for the buyer. If buyers and investors don't understand your value proposition, you have lost them.
- Investors invest in Management teams, not business plans.
Tell them about the 4 key managers, directors and advisors that will implement the business plan, deliver the profits and increase shareholder value. Explain the professional training, relevant experience, successes and failures of the 4 key people. Identify the management gaps and can a qualified investor play a role?
- What is your Technology, Process or Service? Briefly show or demo your product or service so that it is not just a concept. Explain it in terms that your audience will understand. Focus on the value created and who pays and why. Do you have sales or contracts pending that will validate market acceptance?
- Do you have a clear Competitive Advantage that can be sustained over 5 years? What are your advantages over competitors, what patents and trademarks, uniqueness, exclusivity? Explain the strengths and weaknesses of competitors. Will you dominate your market?
- Identify and quantify the Market and its growth rate with clear third party market data. How will you reach the identified market, how much time and resources are required to obtain a sale. How long before buyer pays? Your market share will be?
- Summarize your mid-case Financial Projections. Identify your burn rate, time to breakeven and your conservative gross margin. Naming the largest business risk establishes credibility
- Show your enthusiasm and your Vision of the business, growth potential and uniqueness of opportunity.
Now communicate the investment opportunity.
- You are looking for a realistic financing amount to be used in 3 main ways. Know the range of funding that your investor usually would consider. Don't ask the average private investor for $2 million, nor ask a venture capital company for $100,000.
- Know your stage of development and what Return on Investment that investors expect for that stage of risk. What ROI per annum are you offering? Value of your company calculated 3 different ways. Absolutely critical that valuation is realistic.
- How will the investors monitor the company and their investment? What is the realistic exit strategy for the investors in 4-7 years?
Consider how to communicate this information:
- Verbal "elevator pitch",
- 2 page executive summary,
- PowerPoint presentation, or
- Management team video.
Bob Chaworth-Musters initiated the BC Angel Forum in 1997: where entrepreneurs present in person their company to private Angel investors.
Web Site: www.ANGELforum.org Email: [email protected]
Sponsors: Business Development Bank, Ernst & Young, Science Council of BC, National Research Council, Clark, Wilson, Canadian Venture Exchange, Western Diversification, Vancouver Enterprise Forum, NewMediaBC, ViaTEC, Okanagan Science Council and CATA
- Pre-screened companies seeking up to $1 million, deliver "live" presentations and network with serious investors.
- In one day, 30+ Industrial and Tech companies present in two streams. Investors select which companies to listen to
- Open to all Entrepreneurs is Investor Ready 101 preparation seminar on Monday Nov 4th - www.ANGELforum.org/investor_101_seminar.html
- Angel Forum started in 1997 and 7 companies from the last three Forums have agreed to $2.5+ million funding.